eurozone

Markets 5th November 2014

EU’s low growth hits financials

MADRID | By JP Marín Arrese | Central banks all over Europe bombastically hailed the stress tests results as solid evidence the banking system enjoyed enviable health. Their diagnosis utterly failed to impress the markets. Ten days later, financials are plunging to fresh lows as low growth rates signify dire prospects ahead. Investors feel increasingly uneasy faced with dwarfish interest rates and dwindling intermediary receipts, leading to chronic underperformance and under-sized profits. Many fear that an inability to raise their own funds to plug gaps in their balance sheets might weigh on mounting impairment, sending shivers down the spine. Banks may face rough times ahead should deflationary bouts keep the European economy close to stagnation.

In Europe 4th November 2014

Further depreciation of the Euro due to poor eurozone data

MADRID | By Francisco López | The latest movements within currency markets function as a gauge of the economic momentum in both Europe and the US. The decline of the Euro against the Dollar has increased in the last few days due to poor macroeconomic data in the eurozone, which is in sharp contrast with the vigour shown by the US (who showed growth of 3.5% in the third quarter of 2014).

In Europe 3rd November 2014

Germany: Give me some crowding-out

PARIS | Guest post by Francesco Saraceno | Germany has been sitting on the shoulders of the rest of the world economy, and since 2010 it has been followed by the rest of the eurozone that is globally running trade surpluses. I have already said many times that this is a bad (and dangerous) strategy.

Spanish economy 30th October 2014

Spain: Growth slows down slightly, but it is still ahead of peers

MADRID | The Corner | Spain’s real GDP increased by 0.5% q/q in Q3 14 (flash estimate), in line with market consensus. Experts at Barclays believe that most of the growth contribution came from domestic demand, as weak eurozone growth in Q2 and Q3 likely implied soft external demand from key trading partners, including from the largest three economies.

Markets 28th October 2014

EZ private loans: Depressed… yet stabilising

MADRID | The Corner | Loans to the private sector in the euro area fell by 1.2% year-on-year in September, according to the ECB’s data, a slower rate than the 1.5% decline seen in August. Are there reasons for optimism? It depends. “After seven years of crisis, bank loans continue to fall. Those to the private sector have fallen by -0.6% yoy. Loans to non-financial businesses dropped by -1.8%, with Spain and Ireland especially weak,” Barclay’s Alberto Vigil pointed out. “Now if you want to look through a different glass (loans’ reduction is slowing down), the opposite interpretation is also perfectly correct,” he added.

In Europe 20th October 2014

Europe: Calling a spade a spade

SAO PAULO | By Marcus Nunes via Historinhas | Tim Worstall comes out and calls a “spade a spade” in “Europe Doesn’t Have A Debt Crisis, Europe Has A Monetary Crisis”: The stock markets plunge over concerns about the eurozone; there’s a flight from lower quality sovereign bonds; Greek, Spanish and other periphery bond yields spike. It looks like the eurozone debt crisis is back. But this time around we really should get to grips with the fact that what we’ve got here is really not a debt crisis.

In Europe 16th October 2014

Stimulus, bitte!

MADRID | The Corner | The eurozone’s inflation slipped in September to its lowest level since October 2009 (0.3%), raising fears of an eventual third recession in six years. Prices have been now been in the ECB’s “danger zone” of below 1% for 12 consecutive months. And yet Germany, the biggest economy in the EZ, is torn between deficit control and growth, relieved with a weak euro helping its exports but worried about the same depreciation policy leading to less pressure to implement reforms in countries like France.

Markets 10th October 2014

Loan growth weak but signs of corporate lending pick-up (Barclays)

MADRID | The Corner | Weak loan growth continues in Europe, although there are signs of recovery in corporate lending in France, Italy, UK, Sweden and Belgium. Bank lending surveys point to improving mortgage demand in Italy and Spain; but some deterioration in the UK. For Corporates, banks are reporting some increase in expected corporate loan demand into the year end, most notably in France and Spain, Barclays analysts commented on Friday.

In Europe 9th October 2014

Eurozone: fundamental flaws

MADRID | By JP Marín Arrese | Potential mismatches between overall demand and supply can provide rather upsetting lessons. As Keynes proved, sticking to stability policies in a recession only widens the gap as slackening demand and production drag each other down in an endless spiraling circle. Moreover, he cast serious doubts on the strategy of combining loose monetary policy with balanced budgets for putting the economy back on track. His liquidity trap theory mirrors Draghi’s current warnings on the ECB’s limits in coping with a huge GDP gap.

Markets 8th October 2014

ECB will push for DTA to be replaced by core capital

MADRID | The Corner | The ECB doesn’t like the idea of allowing banks to use Deferred Tax Assets (DTA) to boost their capital buffers, a practice that was meant to be phased out under new European Union rules. The central lender fears that losses would be imposed on taxpayers should entities run into trouble in the coming years, as the WSJ reported. Even if the ECB doesn’t have the power to change that, and is not likely to make any move before the upcoming stress tests, it might push for DTA to be replaced by core capital.

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